Although last year’s high base caused GDP to fall on an annual basis, on a quarterly basis it is now expected to have expanded, meaning that after a year the technical recession in Hungary may have ended. It is increasingly likely that agriculture will save this year’s growth, Világgazdaság writes.
The Hungarian Central Statistical Office will publish second-quarter GDP data on Wednesday. To mark the occasion, Világgazdaság asked analysts what they expect. In the first quarter, the Hungarian economy was still in a technical recession, while annualized growth turned negative again after the first quarter of 2021. According to analysts, although GDP fell by 1.3 percent on an annual basis in the second quarter of this year, due to last year’s high base, it expanded by 0.4 percent compared to the previous three months, so the technical recession may have ended.
According to Péter Virovácz, senior analyst at ING Bank,
the end of the technical recession can be attributed to the performance of agriculture. The weather has been extremely kind so far, and we are likely to see strong quarterly growth on a quarterly basis.
However, the rather strong rebound in the second quarter of 2023 will be in vain, as the base of last year will be extremely high. Indeed, in the first half of 2022, extraordinary government transfers have been a major boost to the economy, especially on the domestic demand side. So in this respect, the pessimism will be countered by the continued shrinking in GDP on a year-on-year basis, he added.
Gábor Regős, head of the Macronome Institute, pointed out that the second quarter data will certainly show a shrinkage on an annual basis, but the big question is the quarterly change in volume, where it is difficult to predict the sign of change. Estimation is not easy, he said, if only because the performance of individual sectors could have been very different from the previous quarter.
While both industry and construction saw a decline in output, services are expected to show a smaller increase.
On an annual basis, it is easier to forecast, with output falling in all sectors except agriculture on the production side, with the largest decline in construction. The high interest rate environment, the withholding of EU funds and the postponement of government and municipal investment due to a lack of resources have significantly curbed investment on an annual basis. Net exports are expected to have made a positive contribution to economic performance, with exports expanding while imports declined due to low domestic demand, he explained.
Gergely Suppan, senior analyst at Magyar Bankholding, pointed out that although the second quarter of this year started weakly, a turnaround is expected in the second half of the year, as energy prices fall sharply. Consumption was held back by falling real wages at the start of the year, but with real wages starting to rise again in the second half of the year as inflation falls, consumption could gradually improve.
The outlook for this year has been boosted by the absence of an acute energy crisis, the resilience of European economies and the continued decline in energy prices, but weak domestic and external demand is overshadowing the outlook.
Nevertheless, with agriculture performing significantly better than expected and the outlook remaining favorable due to good, rainy weather, Magyar Bankholding is reaffirming its forecast for 1 percent growth this year.
Péter Virovácz is also of the same opinion that agriculture will be the tipping point this year and will decide whether the Hungarian economy will be closer to stagnation or 1.5 percent growth. At the moment, ING’s baseline scenario suggests the former, i.e. that economic growth this year could be somewhere between 0.0 and 0.5 percent. Next year, it expects growth to be above 3 percent, but this will depend to a large extent on the dynamism with which domestic demand can recover as purchasing power recovers.
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